1 00:00:02,520 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,760 --> 00:00:10,319 Speaker 2: For those who've been listening to us regularly, you might 3 00:00:10,360 --> 00:00:13,200 Speaker 2: remember a conversation we had yesterday. It was with Bloomberg's 4 00:00:13,240 --> 00:00:15,360 Speaker 2: Jordan Fabian, and it was about whether or not there 5 00:00:15,400 --> 00:00:17,920 Speaker 2: was a focus in the White House. We asked him, Jordan, 6 00:00:18,040 --> 00:00:21,640 Speaker 2: because it was another day of NonStop social media posts 7 00:00:21,680 --> 00:00:25,079 Speaker 2: and flow of thoughts actions from President Trump and his administration. 8 00:00:25,239 --> 00:00:28,080 Speaker 2: It is again today. It feels like it's been like 9 00:00:28,240 --> 00:00:31,480 Speaker 2: that for a while, NonStop, maybe for the past year. 10 00:00:31,720 --> 00:00:33,760 Speaker 2: Looking at that and really trying to figure out if 11 00:00:33,760 --> 00:00:37,280 Speaker 2: there's a philosophy guiding President Trump and his closest advisors 12 00:00:37,280 --> 00:00:39,960 Speaker 2: when it comes to his barrage of executive orders and 13 00:00:40,040 --> 00:00:43,400 Speaker 2: daily challenges to the judicial system feeding a NonStop White 14 00:00:43,400 --> 00:00:48,000 Speaker 2: House cycle is economic Nobel Laureate Drone Asamoglu. He took 15 00:00:48,040 --> 00:00:49,720 Speaker 2: a step back to see if there's some sort of 16 00:00:49,840 --> 00:00:52,600 Speaker 2: theory and wrote about it in a Bloomberg BusinessWeek piece. 17 00:00:52,640 --> 00:00:54,960 Speaker 2: It's featured in the coming new issue that does really 18 00:00:55,000 --> 00:01:00,240 Speaker 2: a deep dive into President Trump's first year in his 19 00:01:00,280 --> 00:01:04,120 Speaker 2: second term. Jerome by the Way, Institute, Professor in the 20 00:01:04,160 --> 00:01:08,039 Speaker 2: Department of Economics at the Massachusetts Institute of Technology Mit 21 00:01:08,280 --> 00:01:11,959 Speaker 2: joins us from Cambridge. So nice to have you here 22 00:01:12,000 --> 00:01:15,120 Speaker 2: with us, and this is a really thoughtful piece. You 23 00:01:15,200 --> 00:01:17,640 Speaker 2: took a step back, you looked at this, and we're 24 00:01:17,680 --> 00:01:21,000 Speaker 2: just trying to understand. You know, this NonStop White House 25 00:01:21,319 --> 00:01:26,240 Speaker 2: news cycle. Is it about the president and his team 26 00:01:26,400 --> 00:01:29,600 Speaker 2: controlling that news cycle? And this is what we all chase, 27 00:01:30,280 --> 00:01:35,280 Speaker 2: you know, is it something more significant beyond just kind 28 00:01:35,319 --> 00:01:38,760 Speaker 2: of a flood the zone concept that we often associate 29 00:01:38,840 --> 00:01:41,840 Speaker 2: with President Trump and his team. What did you come 30 00:01:41,920 --> 00:01:42,200 Speaker 2: up with? 31 00:01:42,880 --> 00:01:46,040 Speaker 3: Well, thanks, thanks a lot having me on the program. Look, 32 00:01:46,080 --> 00:01:49,480 Speaker 3: I mean, obviously there is a flood dozone element in there, 33 00:01:50,000 --> 00:01:56,080 Speaker 3: and it looks chaotic. But in my mind, worryingly, there 34 00:01:56,160 --> 00:01:58,480 Speaker 3: is a bit of a theory, which is that all 35 00:01:58,520 --> 00:02:02,800 Speaker 3: of these actions are aimed at centralizing power in the 36 00:02:02,840 --> 00:02:09,280 Speaker 3: hands of an executive presidency with fewer and weaker checks 37 00:02:09,840 --> 00:02:12,840 Speaker 3: which come eor from institutions or norms. So even the 38 00:02:12,919 --> 00:02:17,440 Speaker 3: foreign actions are all about increasing domestic power. Even the 39 00:02:18,600 --> 00:02:22,360 Speaker 3: sort of unconventional appointments that are about weakening norms that 40 00:02:22,520 --> 00:02:26,000 Speaker 3: control what the president can do and bringing in more 41 00:02:26,080 --> 00:02:30,440 Speaker 3: loyalists that have now more room for maneuver because all 42 00:02:30,480 --> 00:02:36,000 Speaker 3: the norms that had guided US political dynamics have been broken. 43 00:02:36,960 --> 00:02:38,920 Speaker 1: So you write that it would have been viewed as 44 00:02:39,000 --> 00:02:42,679 Speaker 1: completely unacceptable for Bill Clinton, George W. Bush, or Barack 45 00:02:42,720 --> 00:02:46,240 Speaker 1: Obama to ask his attorney general or the DOJ to 46 00:02:46,720 --> 00:02:49,200 Speaker 1: go after enemies. It would also have been considered beyond 47 00:02:49,240 --> 00:02:51,639 Speaker 1: the pale for a president to invoke what you describe 48 00:02:51,639 --> 00:02:54,720 Speaker 1: as a poorly documented crime emergency as a pretext for 49 00:02:54,760 --> 00:02:58,519 Speaker 1: sending the National Guard into US cities, or for a 50 00:02:58,560 --> 00:03:01,000 Speaker 1: president to continue to be involved in family business. Well 51 00:03:01,000 --> 00:03:04,880 Speaker 1: in office, why is it being viewed, at least by 52 00:03:05,200 --> 00:03:09,400 Speaker 1: members of Congress Republicans in Congress as acceptable for President 53 00:03:09,400 --> 00:03:10,440 Speaker 1: Trump to do these things? 54 00:03:11,880 --> 00:03:16,359 Speaker 3: Well, you know, part of the reason why those actions 55 00:03:16,400 --> 00:03:19,000 Speaker 3: would not have been taken in the past is because 56 00:03:19,000 --> 00:03:23,560 Speaker 3: they go against norms. There weren't explicit laws that said 57 00:03:23,880 --> 00:03:28,800 Speaker 3: these things, so it was part of an institutional equilibrium 58 00:03:28,880 --> 00:03:34,960 Speaker 3: with norms of acceptance and backed up by other politicians 59 00:03:36,880 --> 00:03:41,840 Speaker 3: deviating and sort of distancing themselves if a president did that, 60 00:03:42,280 --> 00:03:46,160 Speaker 3: or bigger sort of pushback from civil society or the media. 61 00:03:46,720 --> 00:03:50,160 Speaker 3: But President Trump and his team have been breaking these 62 00:03:50,200 --> 00:03:55,560 Speaker 3: norms systematically for the first year. But even if you 63 00:03:55,640 --> 00:03:59,000 Speaker 3: go to the first term of the president, there was 64 00:03:59,040 --> 00:04:01,880 Speaker 3: already the same attend and all of these have now 65 00:04:01,960 --> 00:04:06,320 Speaker 3: culminated in Trump controlling the party and the rest of 66 00:04:06,400 --> 00:04:09,480 Speaker 3: the party, even part of the judicial system, are no 67 00:04:09,600 --> 00:04:11,640 Speaker 3: longer able to stand up to him, and all of 68 00:04:11,680 --> 00:04:15,800 Speaker 3: the norms that would have helped them sort of mobilize 69 00:04:15,920 --> 00:04:18,919 Speaker 3: around some sort of objection saying this is not acceptable. 70 00:04:19,279 --> 00:04:21,440 Speaker 3: You know, we don't see them now. Recently for the 71 00:04:21,600 --> 00:04:24,960 Speaker 3: FED case, a few senators have started making grambling, so 72 00:04:25,000 --> 00:04:29,200 Speaker 3: perhaps there might be some limit to what the legislature 73 00:04:29,240 --> 00:04:31,800 Speaker 3: is going to put up with. But the part of 74 00:04:31,839 --> 00:04:35,000 Speaker 3: the agenda that is I think now very clearly visible 75 00:04:35,440 --> 00:04:39,360 Speaker 3: is sort of break down one piece after another of 76 00:04:39,520 --> 00:04:42,520 Speaker 3: this edifice that was constraining other presidents that are now 77 00:04:42,560 --> 00:04:43,880 Speaker 3: gone for President Trump. 78 00:04:43,920 --> 00:04:45,880 Speaker 2: So Deerron to basically right. We thought this checks and 79 00:04:45,920 --> 00:04:48,320 Speaker 2: balances would work right three branches of the government. It 80 00:04:48,360 --> 00:04:50,760 Speaker 2: made such sense, and it for so long has pretty 81 00:04:50,839 --> 00:04:55,080 Speaker 2: much worked pretty well. But there was this strategy when 82 00:04:55,080 --> 00:04:59,960 Speaker 2: it comes to the legal part, certainly of the government 83 00:05:00,120 --> 00:05:02,160 Speaker 2: as well as the legislative. But let's just talk the 84 00:05:02,240 --> 00:05:04,200 Speaker 2: legal part, because we did have you know, a judge 85 00:05:04,200 --> 00:05:07,159 Speaker 2: saying dominion Energy can resume a win project that President 86 00:05:07,160 --> 00:05:09,800 Speaker 2: Trump had halted, so we have seen him lose some 87 00:05:09,960 --> 00:05:13,960 Speaker 2: of the judicial actions out there. Having said that, if 88 00:05:14,360 --> 00:05:17,000 Speaker 2: he didn't have that in terms of the Supreme Court justices, 89 00:05:17,279 --> 00:05:20,200 Speaker 2: would we not be maybe having this conversation today? Is 90 00:05:20,240 --> 00:05:23,880 Speaker 2: that what's so much about it? Or is it all 91 00:05:23,920 --> 00:05:27,200 Speaker 2: of it? That and the legislative side of it, and everybody, 92 00:05:27,520 --> 00:05:29,760 Speaker 2: you know, even them GOP members of Congress saying yeah, 93 00:05:30,040 --> 00:05:32,000 Speaker 2: do what you want to do. You know, it's kind 94 00:05:32,040 --> 00:05:34,480 Speaker 2: of interesting because that's their job kind of being taken away. 95 00:05:35,240 --> 00:05:38,920 Speaker 3: Yeah, I mean exactly the sort of separation of powers, 96 00:05:38,960 --> 00:05:44,359 Speaker 3: would you know, not just the Congress and the judiciary, 97 00:05:44,400 --> 00:05:47,680 Speaker 3: but also the independent agencies acting like the fourth Brunch. 98 00:05:47,880 --> 00:05:51,120 Speaker 3: Those were the things that constrained presidents and if today 99 00:05:51,440 --> 00:05:54,160 Speaker 3: those constraints were working, well, we wouldn't be in this 100 00:05:54,320 --> 00:05:59,040 Speaker 3: turmoil in terms of the domestic situation. And part of 101 00:05:59,520 --> 00:06:02,480 Speaker 3: the concern is that right now it's really the parts 102 00:06:02,520 --> 00:06:06,599 Speaker 3: of the judicial brunch that are standing up against Trump indeed, 103 00:06:06,680 --> 00:06:09,960 Speaker 3: But that's that's got its limits because there are a 104 00:06:10,040 --> 00:06:13,160 Speaker 3: lot of Trump appointees, and the Supreme Court, with lots 105 00:06:13,160 --> 00:06:17,080 Speaker 3: of Republican and Trump appointees, hasn't really taken a very 106 00:06:17,120 --> 00:06:20,520 Speaker 3: strong stense either. So all of these are piling up 107 00:06:21,000 --> 00:06:24,560 Speaker 3: and taking us more and more to a situation where 108 00:06:24,760 --> 00:06:28,680 Speaker 3: I think many of the former sort of presidents or 109 00:06:28,720 --> 00:06:33,159 Speaker 3: constitutional scholars would find very scary because the structure of 110 00:06:33,240 --> 00:06:35,400 Speaker 3: US government wasn't meant to function this way. 111 00:06:35,640 --> 00:06:38,960 Speaker 1: So then I'm trying to understand. And one thing that 112 00:06:39,360 --> 00:06:41,200 Speaker 1: we do each and every day is we look at 113 00:06:41,200 --> 00:06:44,240 Speaker 1: the markets, and we look at market reaction to these things, 114 00:06:44,240 --> 00:06:45,799 Speaker 1: and I think a lot of people have been surprised 115 00:06:45,800 --> 00:06:48,440 Speaker 1: that we haven't necessarily seen a bond market reaction to 116 00:06:49,040 --> 00:06:52,600 Speaker 1: some of these moves. Markets were and have been kind 117 00:06:52,640 --> 00:06:55,520 Speaker 1: of seen as a backstop here to at least some 118 00:06:55,600 --> 00:06:57,960 Speaker 1: of the things that the president has said he will 119 00:06:58,000 --> 00:07:00,680 Speaker 1: do or wants to do. Do you think are reacting 120 00:07:00,880 --> 00:07:04,360 Speaker 1: to his decisions or do you think they're saying, hey, 121 00:07:04,800 --> 00:07:07,120 Speaker 1: it's all fine and good at least up until now. 122 00:07:08,760 --> 00:07:11,559 Speaker 3: Yeah, it is hard to understand why the markets haven't 123 00:07:11,600 --> 00:07:15,520 Speaker 3: reacted more because some of the effects are already seen 124 00:07:16,440 --> 00:07:19,800 Speaker 3: from the tariffs, And indeed, people you know, talk about 125 00:07:19,840 --> 00:07:22,680 Speaker 3: the bond market now because the stock market hasn't reacted. 126 00:07:23,160 --> 00:07:28,200 Speaker 3: But I think that just really underlies that, you know, 127 00:07:28,240 --> 00:07:31,280 Speaker 3: the stock market is not the fifth branch of government. 128 00:07:31,760 --> 00:07:36,080 Speaker 3: It's not really a hard constraint in the same way 129 00:07:36,120 --> 00:07:39,600 Speaker 3: that the other ones were supposed to be on the 130 00:07:39,920 --> 00:07:42,880 Speaker 3: sort of centralization of power in the hands of one 131 00:07:42,920 --> 00:07:49,160 Speaker 3: person or one group, And the tariff debacle demonstrates that 132 00:07:49,280 --> 00:07:52,240 Speaker 3: the administration is much bolder and is willing to take 133 00:07:52,280 --> 00:07:55,720 Speaker 3: actions that could lead to market reactions, at least in 134 00:07:55,760 --> 00:07:59,040 Speaker 3: the short run. Now some people are saying, Oh, it's 135 00:07:59,040 --> 00:08:01,440 Speaker 3: the bond market really that we need to watch out for. 136 00:08:01,720 --> 00:08:05,720 Speaker 3: I don't know why. You know, right now, the bond 137 00:08:05,800 --> 00:08:09,160 Speaker 3: market would be much more important than the stock market, 138 00:08:09,240 --> 00:08:11,360 Speaker 3: and sometimes both of them are things that both the 139 00:08:11,400 --> 00:08:16,200 Speaker 3: administration and the business community are watching. But I wouldn't 140 00:08:16,280 --> 00:08:19,400 Speaker 3: you know, bet on, you know, the market mechanism being 141 00:08:19,600 --> 00:08:24,360 Speaker 3: a strong enough guardrail against this kind of executive imperial 142 00:08:24,400 --> 00:08:27,040 Speaker 3: presidency emerging. And if it does, I think it has 143 00:08:27,400 --> 00:08:30,920 Speaker 3: really sweeping implications for how business is done again. You 144 00:08:30,920 --> 00:08:34,040 Speaker 3: can see that from the fact that the President Trump 145 00:08:34,040 --> 00:08:36,360 Speaker 3: can invite people to his office and say give us 146 00:08:36,360 --> 00:08:39,240 Speaker 3: twenty percent of your shares. Yeah, something. 147 00:08:39,360 --> 00:08:42,400 Speaker 2: Yeah, there's just a moment after a moment where many 148 00:08:42,440 --> 00:08:44,960 Speaker 2: would say this is it's kind of remarkable which I 149 00:08:45,000 --> 00:08:48,920 Speaker 2: went Drona Asimoglu. He is economic Nobel laureate. He is 150 00:08:49,000 --> 00:08:52,080 Speaker 2: also Institute professor in the Department of Economics at MIT, 151 00:08:52,400 --> 00:08:56,840 Speaker 2: joining US from Cambridge. So I am curious is this lasting? 152 00:08:57,640 --> 00:09:01,640 Speaker 2: Like I am wondering who this emboldens in terms of 153 00:09:01,679 --> 00:09:04,679 Speaker 2: whoever might be in the White House next? Is this 154 00:09:04,760 --> 00:09:06,800 Speaker 2: the playbook? The new US playbook? 155 00:09:07,040 --> 00:09:09,320 Speaker 3: And to be sorry, that's what I'm worried about exactly. 156 00:09:09,360 --> 00:09:13,120 Speaker 3: I mean, you know, because look, I mean Trump is 157 00:09:13,160 --> 00:09:16,640 Speaker 3: an agent of change, He's really reshaping norms and institutions, 158 00:09:16,679 --> 00:09:20,600 Speaker 3: but he is himself a symptom of what was wrong 159 00:09:21,040 --> 00:09:24,000 Speaker 3: in some sense with the US system. There was a 160 00:09:24,040 --> 00:09:26,640 Speaker 3: lot of inequality, there was a lot of discontent, and 161 00:09:27,000 --> 00:09:31,800 Speaker 3: there was also some gridlock. You see more executive orders 162 00:09:32,080 --> 00:09:35,600 Speaker 3: by Bush than by Obama than by Biden. So Trump is, 163 00:09:35,720 --> 00:09:38,520 Speaker 3: you know, accelerating that trend, but he's continuing that trend. 164 00:09:38,960 --> 00:09:41,960 Speaker 3: And I do not trust that the next Democrat or 165 00:09:41,960 --> 00:09:44,560 Speaker 3: Republican is going to be much better behaved. Once the 166 00:09:44,559 --> 00:09:48,400 Speaker 3: floodgates are open, I think we're going to go to 167 00:09:48,480 --> 00:09:52,280 Speaker 3: a place where, you know, presidents could have much more 168 00:09:52,400 --> 00:09:55,800 Speaker 3: arbitrary power, both in terms of their ideological agenda, but 169 00:09:55,840 --> 00:09:58,840 Speaker 3: also in terms of corruption and kleptocracy. 170 00:09:58,960 --> 00:10:01,640 Speaker 1: You know, you've study a lot, and part of your 171 00:10:01,679 --> 00:10:04,560 Speaker 1: study has included the strength of institutions and the relationship 172 00:10:04,559 --> 00:10:08,480 Speaker 1: between economic prosperity and the strength of these institutions, and 173 00:10:08,520 --> 00:10:11,240 Speaker 1: on the implications of this for the United States. It's 174 00:10:11,360 --> 00:10:14,199 Speaker 1: widely seen as an area of the world that has 175 00:10:14,200 --> 00:10:17,120 Speaker 1: had transparency, It has markets that people pay a premium 176 00:10:17,120 --> 00:10:20,480 Speaker 1: for as a result of that transparency, as a result 177 00:10:20,559 --> 00:10:23,600 Speaker 1: of the regulatory environment. And I'm wondering, kind of to 178 00:10:23,600 --> 00:10:26,360 Speaker 1: build on Carroll's question, what that means for the future 179 00:10:26,640 --> 00:10:30,360 Speaker 1: of the US economy. If these norms are indeed shattered 180 00:10:30,400 --> 00:10:32,440 Speaker 1: permanently or at least in the near future. 181 00:10:32,920 --> 00:10:36,600 Speaker 3: We would be entering a completely unknown territory. I mean, 182 00:10:36,600 --> 00:10:41,240 Speaker 3: there are so many advantages that we enjoy because of 183 00:10:41,280 --> 00:10:47,679 Speaker 3: our institutions. Everybody wants to have investment in US assets, treasuries, 184 00:10:47,800 --> 00:10:51,800 Speaker 3: corporate debt, stock market. Why. Because people trust US institutions, 185 00:10:51,800 --> 00:10:55,280 Speaker 3: they want to be subject to US law if there's 186 00:10:55,320 --> 00:10:59,120 Speaker 3: a dispute. This is a very dynamic entrepreneurial economy. Why 187 00:10:59,160 --> 00:11:01,200 Speaker 3: people think that if they're successful, they're going to be 188 00:11:01,200 --> 00:11:03,280 Speaker 3: able to take on the biggest companies and build their 189 00:11:03,320 --> 00:11:06,600 Speaker 3: own business. Again, that depends on institutions. In many of 190 00:11:06,640 --> 00:11:09,080 Speaker 3: the countries around the world. You see that incumbents crush 191 00:11:09,600 --> 00:11:12,520 Speaker 3: every bit of competition. So if we start damaging that, 192 00:11:13,000 --> 00:11:15,559 Speaker 3: the secret source of the US economy would be heavily 193 00:11:16,480 --> 00:11:17,200 Speaker 3: damaged too. 194 00:11:17,400 --> 00:11:19,600 Speaker 2: So we're not China, but we're something else. Just got 195 00:11:19,600 --> 00:11:21,360 Speaker 2: about ten to fifteen seconds. Who are we? 196 00:11:21,520 --> 00:11:23,760 Speaker 3: Yeah, well we are something else. I don't know where 197 00:11:23,760 --> 00:11:27,520 Speaker 3: we're going. I mean state institutions are State capitalism is 198 00:11:27,520 --> 00:11:30,280 Speaker 3: what people used to call China. While we're getting close 199 00:11:30,320 --> 00:11:30,520 Speaker 3: to that.